Shanghai-based stocks have already risen since the government announced its plan to develop the city into a global financial and shipping center by 2020, and these analyst statements suggest that will continue. However, they also warn that boost won’t continue at the same rate forever, and that many companies on the Shanghai Index will only show improved earnings in the “medium term.”

— Eliza Ronalds-Hannon

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China’s biggest domestic carriers are among stocks that will extend gains as Shanghai opens a free-trade zone, according to Goldman Sachs Group Inc.

The Shanghai Composite Index has risen 15 percent since reaching this year’s low on June 27. Banks, shippers and port operators have paced the gains since Aug. 22, when the Ministry of Commerce said the city’s free-trade zone proposal was approved in July. Shanghai International Port Group Co. climbed 170 percent from Aug. 22 through yesterday, the most among the 995 companies on the Shanghai index. China Eastern, which is based in Shanghai, has climbed 35 percent.

“Be selective in choosing potential beneficiaries,” the Goldman Sachs analysts wrote. “Given actual earnings boost may show up only in the medium term, we prefer beneficiaries that have upsides based on existing businesses, with the Shanghai free trade zone potentially providing room for additional upside.”

The free-trade zone is part of the central government’s plan to develop the city into a global financial and shipping center by 2020. A draft plan for the area seen last week by Bloomberg News included expanded opportunities for foreign companies in industries from banking to health insurance. Details of the new zone’s policies and rules haven’t been announced.

Editors: Allen Wan and Michael Patterson. To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net. To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net.

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